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This is a guest commentary.
The headline figure — an estimated $150 billion the mainly black-market US sportsbook sector currently generates in annual handle — is certainly one to grab attention.
In reality, building an industry generating $4 to $6 billion per year in revenues within five years is an attainable, not to mention impressive, goal.
However, it is too early for operators to begin counting their winnings quite yet. While much of the post-PASPA excitement has understandably focused on the potential rewards, the considerable set-up and running costs of a successful sportsbook have received less attention.
Just take a look at the staffing as one example. According to the BettingJobs.com Salary Survey, the average cost of staffing a sportsbook can exceed $1.7 million per year.
And this figure does not consider bolt-on functions such as an in-house trading team, which alone can set back an operator something in the region of $600,000 per annum.
Those who succeed in the burgeoning US sportsbook industry will first have to invest significant funds into technology, data, marketing and staffing, and may not expect to be profitable at first.
For this reason, established European operators are confident they are in the driving seat when it comes to capitalizing on the US opportunity.
Many of these operators can draw upon almost two decades of online sportsbook experience. Some sit on large cash reserves and will be able to outspend competition in an initial marketing push.
For many of them, the opening of the US sportsbook market has arrived at just the right time.
Across the continent, the move towards a dot country market — that is each jurisdiction regulating independently — has brought with it increased tax burdens and more scrutiny across everything from marketing to responsible gaming.
In Sweden, new regulation set to be introduced at the start of 2019 will likely impose significant restrictions on the ways operators can provide bonuses to players.
Meanwhile, in the UK, the government recently introduced a £2 stake limit on fixed-odds betting terminals (FOBTs), and is also set to increase the remote gaming tax to make up any budgetary shortfall from the decrease in taxable FOBT revenues.
The FOBT announcement sent the share prices of major UK-facing operators tumbling. Interestingly, most bounced back a few days later with the news that PASPA had been repealed.
These share price movements encapsulate the feelings of many European operators. With regulatory burdens and increased competition, the saturated markets of the UK, Sweden and others are becoming less appealing.
But the experience gained in these gaming hotbeds should serve the operators well in a land of relatively untapped potential.
So what advantages do European operators have over US counterparts when it comes to getting ahead in the post-PASPA landscape?
Obviously, many of these operators have been running sportsbooks and casinos for decades, both in the retail and online spaces.
In practical terms, this means a big head start on technology and product. Sure, a great deal of technology can be sourced from third-parties these days, but even there these operators have the expertise to get the most out of the products and tools available.
The European operators already have established branding and marketing functions in place. Certainly, marketing campaigns will need to be tailored to territory, but again, these multi-jurisdictional operators have experience doing just that.
Other advantages these operators will enjoy will be trading and risk management experience, and the flexibility to comply with an ever-changing set of regulatory, anti-money laundering and fraud legislation.
It is unclear how state-by-state legislation for sports betting will look at this stage, but European operators have spent much of the past five years ensuring their platforms are agile enough to enter a range of dot country European markets. The approach in the US should be familiar to them.
Finally, the financial advantage is perhaps the most important. We are already seeing operators flexing their financial muscles to ensure they are well positioned for US expansion, with Paddy Power Betfair snapping up fantasy sports operator FanDuel.
Others are striking partnerships in the US. William Hill is already taking bets at the Monmouth Park Racetrack and Ocean Resort Casino in New Jersey.. And on the online casino side, 888 has a long-standing arrangement with Caesars in New Jersey.
Despite the advantages European operators have on paper, this is no guarantee of success as the US market opens up.
Indeed, many will find the realities of doing business in the US to be more challenging than initially thought.
It goes without saying that the US is a very different market to Europe. Most obviously, basketball, football and baseball will take center stage over soccer. This will mean risk models and the approach to trading will have to adapt.
Players will have differing expectations than their European counterparts. Education will be an essential part of the process. Many US customers will have never placed a sports bet before; simplifying the user journey will be critical.
Similarly, from a product perspective it may not make sense to be overly ambitious at first. For instance, the success of the cash-out product in Europe only came after many years of traditional sports betting, with many punters having experience of using betting exchanges. The product may not work so well in a less mature market.
There are other areas where seamless solutions may not be immediately forthcoming, such as possible friction between European businesses and US operator partners.
Those with the best understanding of the US gambler today are the casino, racetrack and tribal operators already active in the US.
While these operators may lack the experience of running a sportsbook or online casino, they are in a position to supplement their customer-focus with third party or hired expertise on the operations front — without the need to partner with an established European operator.
Of course, onboarding iGaming talent from Europe or Asia is not a simple process. There will be competition for the best staff from larger, and more established operators elsewhere. Obtaining visas to bring this talent to the US is not always easy in the current political climate.
There are also a wide range of essential roles to be filled for any iGaming operator, and it can take careful planning to build a team structure that covers all your bases.
To start with, the going rate for a sportsbook manager or product manager for your core offering is currently around $85,000/year, according to the BettingJobs.com Salary Survey. To upgrade this position to a head of sportsbook ($170,000) or VP of sportsbook ($210,000) is even more costly.
And this is just the start. On the technical side, even relatively junior developers for the iGaming industry demand an average salary of almost $70,000 per year.
To build a marketing team, you will need to consider employing a head of marketing (average salary: $165,000/year according to the BettingJobs.com survey); a VIP manager ($50,000); an affiliate manager ($55,000) and a content manager ($45,000).
As already mentioned, a basic trading team can cost around $600,000 per year, and this is before you consider other key roles such as a head of finance ($115,000) and a compliance manager ($85,000).
To ensure US operators gain full value when assembling iGaming teams, look at the organizational structure of similar operators in other regions.
Benchmark against salary and cost of living reports but don’t forget to account for relocation and US specific costs, such as healthcare. Putting together attractive packages including bonus schemes and stock options can also help reduce the initial outlay.
Another way to cut the costs of hiring a large team from the outset is to work with consultants and experts on a project-by-project basis.
This is a way for US operators to gain instant access to top talent without needing to worry about visas and relocation costs.
Leveraged correctly, your entire team will benefit from the knowledge sharing of these consultants, strengthening your operation considerably. Once the local team is up to speed, the expert can take a step back, or return to further develop the business when needed.
Aside from empowering US operators with decades’ worth of sportsbook and iGaming experience, this approach also should enable these operators to avoid many of the mistakes European operators made in their early years.
Regardless of the path you choose to tread, it will be those who understand that operators are little more than the sum of their team’s iGaming expertise who enjoy most success in the US sports betting market and beyond.